AI Stock Watch: Predicting the Next Big Stock Splits in 2024

With the explosion of interest in artificial intelligence (AI) stocks, catalyzed by the debut of OpenAI's ChatGPT in late 2022, investors are keeping an eager eye on the market for the potential next stock-split candidates. Some technology leaders believe that these generative AI models may revolutionize industries just as the internet did in the last 30 years, laying the groundwork for unprecedented growth and investment opportunities.

Amid the rising shares, stock splits have garnered significant attention as many prominent tech companies, including Tesla, Apple, Alphabet, Amazon, Nvidia, and Shopify, have opted for stock splits in the previous two years. Although a stock split doesn't alter a company's underlying value—holding the same fractional ownership for investors—such events generally signal a company's success by highlighting that the share price has risen high enough to warrant a split, making it more accessible to retail investors.

Additionally, historical data suggests that stocks post-split often outperform the market, possibly driven by the vitality of the businesses achieving such milestones or the optimistic investor sentiment that follows.

The Nasdaq Composite's impressive rise of over 41% this year sets the stage for a potential new batch of stock splits in 2024. Two AI-focused companies look primed for such a move next year.

Broadcom: A Giant in Networking Technology

Broadcom has established its prominence in the market with a value exceeding $500 billion, courtesy of strategic acquisitions like VMware and robust organic growth. The company's stock price has doubled this year as it is seen as one of the beneficiaries of the AI surge.

While the overall growth is tempered by the broader semiconductor industry's slowdown, AI demand is proving to be a key lever for growth. Broadcom's CEO, Hock Tan, pointed out that nearly 20% of the company's semiconductor revenue for the quarter came from generative AI products. This segment is expected to grow from 15% to 25% year-over-year, nearly doubling its revenue. With shares priced over $1,100, Broadcom has yet to experience a stock split. However, given its current trajectory and share pricing, it's poised as a likely candidate for splitting.

Nvidia: Reigning Champ of AI Chips

Nvidia's GPUs and accelerators have been crucial for companies requiring expansive AI infrastructure. The stock reflects this demand, having tripled over the past year. With third-quarter revenues soaring 206% and adjusted earnings per share up almost 500%, Nvidia is showing no signs of slowing down.

At around $500 per share, a price point close to what it was during its previous split in 2021, Nvidia might just be ripe for another split. Given its continued strong performance and growth prospects, another split could be on the horizon if the share price maintains its ascent.

AI, stocks, splits